Growth in sub-Saharan Africa in 2018 is estimated at 2.3 per cent, 0.4 percentage points lower than our October estimate, and down from 2.5 per cent in 2017, according to the April issue of Africa’s Pulse.
This slower-than-expected growth comes from both global and domestic factors.
Globally: a volatile economic and financial environment, including trade tensions, protectionism, and recovering but uncertain commodity prices is having obvious negative impacts on some African economies.
Domestically: macroeconomic instability including poorly managed debt, inflation, and deficits; political and regulatory uncertainty; and fragility are holding back African growth.
We expect growth in Sub-Saharan Africa to recover to 2.8 percent in 2019 supported by exports, private consumption, a rebound in agriculture, and an increase in mining production and services in some countries.
Although regional growth is expected to rebound in 2019, it will have remained below 3 percent since 2015.
A closer look:
In Nigeria, growth reached 1.9 per cent in 2018, up from 0.8 per cent in 2017, reflecting a modest pick-up in the non-oil economy.
South Africa came out of recession in Q3 of 2018, but growth was subdued at 0.8 per cent over the year, as policy uncertainty held back investment.
Angola, the region’s third largest economy, remained in recession, with growth falling sharply as oil production stayed weak.
Growth picked up in some resource-intensive-countries like the Democratic Republic of Congo and Niger, as stronger mining production and commodity prices boosted activity alongside a rebound in agricultural production and public investment in infrastructure.
In others, like Liberia and Zambia, growth was subdued, as high inflation and elevated debt levels continued to weigh on investor sentiment.
In the Central African Economic and Monetary Community, a fragile recovery continued as reform efforts to reduce fiscal and external imbalances slowed in some countries.
Non-resource-intensive economies such as Kenya, Rwanda, Uganda, and several in the West African Economic and Monetary Union, including Benin and Côte d’Ivoire recorded solid economic growth in 2018.
Special Topic: Fragility
More than half of the world’s fragile countries are in sub-Saharan Africa. Two-thirds of the underperforming countries in terms of growth in the region are fragile.
Fragility in a handful of countries is costing the entire continent over half a percentage point of growth per year. That is 2.6 percentage points over five years.
This is not just an economic issue. Fragility is not only keeping African countries from creating jobs and reducing poverty as quickly as they could; it also comes at a cost in terms of social cohesion and the social contract between citizens and governments.
The good news is, we know that countries can successfully escape fragility. Two of the fastest growing economies on the continent were once fragile: Ethiopia and Rwanda.
There are lessons to be learned from these countries. They improved their policy environment, strengthened their institutions, and strengthened state capacity to deliver services to their people. This has led to stronger growth and a more attractive climate for private investors.
As the drivers and nature of fragility evolve, so too must the approach to overcoming it. Countries still must focus on strong domestic institutions, rule of law, and state capacity, but it is increasingly clear that at the same time, solutions must be collective, not country-by-country.
In corridors such as the Sahel, the Horn of Africa, the Lake Chad region, and the Great Lakes, the perpetrators of violence and terrorism often cross borders, and people are forced to flee that violence either within or across borders. Drought and floods do not respect national borders, and nomads move irrespective of borders.
Tackling fragility will require countries to work together to find lasting solutions for a more stable and secure future.
Digital Transformation
Digital Transformation will unlock new pathways for inclusive growth, innovation, job creation, service delivery, and poverty reduction in Africa
While Africa has made great strides in mobile connectivity, the continent lags the rest of the world in access to broadband. There is still a long way to go.
Across the entire African continent, including sub-Saharan and North Africa, the digital transformation could increase growth per capita by 1.5 percentage points per year and reduce the poverty headcount by .7 percentage points per year.
The benefits of the digital transformation in sub-Saharan Africa are even higher: it can increase growth by nearly two percentage points per year and reduce poverty by nearly one percentage point per year.
When paired with stronger investments in human capital, impacts across the African continent can be more than doubled: 3.8-4 percentage points of growth and 1.9-2 percentage points poverty reduction per year.
The digital economy will create more jobs, encourage entrepreneurship for youth, raise productivity of farmers, bring more women into the labor force, and create new markets – all of which boosts growth.
For those growth dividends to materialize, it is critical to create much-needed digital infrastructure; put the right regulatory frameworks in place; to invest in skills that allow workers, entrepreneurs, and government officials to seize opportunities in the digital world; and to build accountable institutions that use the internet to empower citizens.
